Steadily, investing in the stock market – be it mutual funds, shares, initial public offerings or derivatives – became the craze for millions of Indians willing to take risks, NSE benchmark Nifty 50 rose 10.5% during the calendar year, climbing from 23,645 on 31 December 2024, to 26,130 on 31 December 2025. The BSE Sensex rose 9.06% in 2025, closing at 85,220.6 on 31 December, compared with 78,139.01 at the end of 2024. This marked its 10th consecutive year of positive annual returns.

Also, India’s total number of demat accounts reached 19.24 crore by March 2025, up from 15.14 crore a year earlier, reflecting growing household interest in equities.

Till last year, every now and then headlines would scream a single message: “Sensex and Nifty touch their all-time high.”

That is changing.

Negative returns on the bourses now seem to be the new normal. The global turmoil pushing energy prices, increasing yield of global bonds, steady fall in the rupee, and the continuous withdrawal of FIIs (foreign institutional investors) from India have now set the alarm bells ringing.

On 8 October, a day after the Reserve Bank of India’s (RBI’s) monetary policy announcement, the Sensex fell by over 1,000 points to touch 71,593.24, wiping out about ₹11 lakh crore in just a single day. The broad-based Nifty plunged by 371 points. Gold and silver prices too witnessed corrections. Since January 2026, the stock market has witnessed a sharp decline -- the Sensex fell nearly 15% and the Nifty 50 about 13%.

As returns from the stock market have remained subdued for more than a year, the bigger question is: where do I invest my money?

Fixed Income Instruments

Fixed income instruments have once again started gaining traction.  It is not because equities have permanently lost their role, but because the trade-off between risk and certainty has become more visible.

Sample this: If you invest ₹5 lakh in a fixed deposit offering 7% interest for one year, you will receive a return of ₹35,000, though post-tax the amount becomes less. Now invest the same amount in the stock market, gold, or silver. There is no fixed return – your returns could be negative, positive, or nothing.

Policy and regulatory framework too boosted the stock market – the most important being the tax structure. In the case of FDs, a 10% TDS would be applicable if the interest earnings are over ₹40,000 in a financial year. For senior citizens, the threshold is ₹50,000.

“Besides the hope of making bigger gains, the skewed tax structure also led people to move to stock markets. Most Indian investors have been willing to take risks, but when the stock market returns over months remain negative or subdued, doubts appear, and now we see that sentiment changing,” a brokerage firm executive said.

Bank deposits have already started showing an uptick. More and more investors are now expected to turn to instruments promising assured returns, and the Reserve Bank’s decision to raise the benchmark interest rate or repo rate is good news. It may prompt banks to consider raising interest rates on FDs and the government to revise the rates on small savings schemes.

In effect, the move to hike the repo rate by 25 basis points to 5.50% may restore some of the lost shine to bank fixed deposits and small savings schemes. Also, with equity markets under pressure and gold and silver no longer delivering the returns they once did, assured-return instruments will become more attractive for savers seeking certainty.

Reserve Bank’s Repo Rate Hike

In addition to raising the repo rate to 5.5% on 7 October 2026, RBI’s Monetary Policy Committee (MPC) also voted unanimously on changing the policy stance from “neutral” to “calibrated tightening,” signalling that the central bank may go in for more rate hikes in the coming months. The next bi-monthly policy is due on 4 December.

The decision came amid persistent pressure on financial markets. RBI Governor Sanjay Malhotra, while unveiling the decision of the MPC, also spelled out the future course of monetary policy action.  “Given the current conditions, rate cuts are off the table in the near term,” he said, adding that the next policy action “can only be a rate hike or a pause,” depending on evolving growth and inflation conditions.

The repo rate is the rate at which RBI lends short-term funds to banks. It is not the rate a depositor earns on a fixed deposit, but it influences the broader cost and availability of money in the financial system. “For savers, especially senior citizens, the message is clear -- the era of rate cuts is over, and the probability of higher deposit rates has improved”, said an expert.

A repo rate hike raises banks’ marginal cost of funds. Banks may respond by raising rates on fresh fixed deposits, particularly if they need deposits to fund loan growth or to compete with government securities and small savings schemes.

According to Adhil Shetty, CEO, BankBazaar, the repo rate hike is “a welcome step for savers, though the benefit will build up gradually. Banks usually revise deposit rates in their own time, and new deposits get the higher rate first.”

No Automatic Hike In FD Rates

The RBI’s action does not mean that FD rates will rise immediately and automatically. RBI itself noted that transmission in the credit market has reflected dissimilar movements in deposit and lending rates, and that the weighted average domestic term deposit rate had actually moderated for fresh deposits in July-August because of a surge in liquidity from FCNR (B) deposit mobilisation.

During the 2022–2023 tightening episode, for instance, the RBI raised the repo rate from 4.00% in early 2022 to 6.50% by early 2023, yet many large banks’ 1-year FD rates peaked in the 6.75–7.25% band rather than rising in tandem with the policy rate. Similarly, in the 2025 rate-cut cycle, when the RBI lowered the repo rate by 125 bps, FD rates fell but not uniformly across all banks.

"I believe that in the next two-three months, there may not be any rate action on the deposits because we have sufficient liquidity in the system,” SBI chairman C.S. Setty said, but added that some lenders may have to consider increasing deposit rates if loan demand continues at elevated levels.

The current policy shift does change the incentive structure. With system liquidity being managed more tightly and the RBI seeking to align the weighted average call rate with the repo rate, banks may find it necessary to raise deposit rates.

According to  Sachin Sachdeva, vice-president and co-group head, financial sector ratings, ICRA, "Deposit-side transmission is likely to begin only after a few months once liquidity gets absorbed and lenders start chasing deposits."

Two to three months, anyway, is not a long time when you're looking to park funds for a longer period to get assured returns. For youngsters, the catchphrase at the moment should be -- better wait than be sorry.